"Dear All,
‘Legal Pension’ or ‘State Funded Pension” may have become history years from now….
Otto von Bismarck invented the Social Security System in 1884. He set the age of retirement at 65 and back then, very few people lived that long as life expectancy was 46.3 years. The century we live in now, life expectancy has increased by 30 years for men (nearly 40 for women). Our view of work is still however dictated by the 65 number.
According to a report from the United Nations, Europe has the highest proportion of people aged over 60 of any region in the world and that is forecast to rise to almost 35% by 2050 from 22% in 2009. In so called developed countries, the average lifespan will reach almost 83 by 2050, up from about 75 in 2009. Life expectancy in Europe is increasing at the rate of 5 hours/day according to Charles Cowling, managing director of JLT Pension Capital Strategies Ltd in London.
According to Mercer’s McGuinness, “Pension managers and governments are relying on economic growth to safeguard the promises they make. If the Eurozone grows too slowly to bolster public and private vaults, the retirement plans may become unaffordable.”
According to a report by Economist Magazine in March, last year there were 4.2 people of working age for every pensioner in France. The ratio will fall to 1.9 by 2050. In Germany, the proportion will decline to 1.6 from 4.1 in the same period. Do I need to emphasize the pressure this will put on Germany ? What they will likely do is to cut back on benefits. And private pensions funds are on pressure too as benchmark euro-rates are at their lowest level since 13 years meaning that they will have to hold more assets to provide for projected long-term payout.
“Pension plans in countries such as Greece or Portugal may benefit from exiting the euro as higher interest rates that would likely accompany a return to their national currencies would cut the cost of liabilities, while assets invested abroad would almost certainly gain in value”, according to Mercer, a unit of Marsh&McLennan Cos.
On December 19th 2011, the Bundesbank predicted German growth will slow to 0.6% this year before recovering to 1.8% in 2013.
The National Statistics Institute in Madrid said today that Spanish output at factories, refineries and minds adjusted for the number of working days declined 7% from a year earlier, the most since October 2009.
Retirement age at 70 or even 75 ? That’s the path we may have in front of us….Not everyone may object to this…some people may have the desire to never retire but those who’d like to spend more time going fishing or to spend time with their family, will need to think of how they’re going to secure that pension and think about how to invest for their future benefit of life….
Countries of the Next 11 Emerging Markets don’t face the same burden. The median age of the population in Turkey for example is approximately 29 years (65 years and over : 7.2%), in Indonesia the median age is 27.3, in Nigeria only 19.2 years (65 years and over 3.1% of population). Hence, the burden on the economy in terms of retirement provisions and medical care for elderly people is far less than is the case in developed countries, leaving room for educational development, a young consumer society and domestic growth."
Kind regards,
Vincent J.Derudder
Chairman
Fédération Européenne des Conseils et Intermédiaires Financiers
Generali Tower - Business Center - 12th Floor
Avenue Louise 149/24
B - 1050 Brussels (Belgium)
Tel.: +32 2 535 76 22
Fax: +32 2 535 75 75
Email: fecif@skynet.be
Web: www.fecif.eu
